Exhibit 99.1
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| NEWS RELEASE | |  |
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| FOR IMMEDIATE RELEASE | | Contact: | | R. D. Leslie |
| | | | | Chief Financial Officer |
| | | | | (936) 637-5325 |
LUFKIN INDUSTRIES REPORTS 22.0% GROWTH IN FOURTH-QUARTER
EARNINGS PER DILUTED SHARE TO $0.61
Year-End Backlog Increases 86% to $113.2 Million
Establishes 2005 Earnings Guidance in a Range of $3.00 to $3.50 per Diluted Share
LUFKIN, Texas (Feb. 10, 2005) — Lufkin Industries, Inc. (NASDAQ: LUFK) today announced results for the fourth quarter and twelve months ended December 31, 2004. Sales for the fourth quarter increased 43.8% to $107.4 million from $74.7 million for the fourth quarter of 2003. Net earnings rose 28.5% to $4.3 million for the fourth quarter of 2004 from $3.4 million for the fourth quarter last year. Net earnings per diluted share were $0.61 for the fourth quarter of 2004, an increase of 22.0% from $0.50 for the fourth quarter of 2003.
Sales for 2004 increased 35.6% to $356.3 million from $262.3 million for 2003. Net earnings were $14.4 million for 2004 up 48.1% from $9.7 million for 2003. Net earnings per diluted share grew 41.8% for 2004 to $2.07 from $1.46 for 2003.
Douglas V. Smith, president and chief executive officer of Lufkin, remarked, “Lufkin’s substantial profitable growth for the fourth quarter of 2004 capped a year of strong performance by the Company and positioned us well to achieve further growth in 2005. As we have experienced throughout 2004, our oil field division led our growth for the fourth quarter with a 49.6% increase in sales from the fourth quarter of 2003 and a 13.3% increase from the third quarter of 2004. This growth continued to be driven by strong demand in the U.S. and Canada for new pumping units, which also contributed to the significant growth of our foundry operations, as well as in our services and automation businesses. In addition, in the fourth quarter international demand for new pumping units increased.
“We were also pleased with the performance of our power transmission division for the fourth quarter, which produced 26.3% comparable-quarter growth in sales and 24.3% sequential quarter growth. These increases reflect an improved environment throughout the business, although sales continued to reflect greater activity in industrial markets for lower speed gear products and in our gear repair business than in high-speed gear markets. Our trailer division sales increased 50.7% for the latest quarter over the fourth quarter of 2003, consistent with the stronger environment demonstrated for the last two quarters versus the prior year. Fourth-quarter trailer sales were 3.8% lower than the third quarter of 2004, primarily in response to higher pricing that more fully reflected the significant increases in raw materials during 2004.
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Lufkin Industries, Inc.¨ 601 South Raguet¨ Lufkin, Texas 75902¨ (936) 634-2211
LUFK Announces Fourth-Quarter Results
Page 2
Feb. 10, 2005
“We complemented our strong comparable-quarter sales performance by achieving 86% growth in our backlog to $113.2 million at the end of 2004 from $60.9 million at the end of 2003. Illustrating the strong demand for new pumping units discussed earlier, our $61.6 million backlog for the oil field division increased 147.1% from the end of 2003 and 30.1% from the end of the third quarter of 2004. The power transmission division also produced a substantial increase in its backlog during 2004, to $40.1 million, which was up 61.4% from the end of 2003 and 4.5% from the end of the third quarter of 2004. Again reflecting the higher pricing environment that affected sequential-quarter trailer sales, the trailer division’s backlog increased 3.9% to $11.5 million at the end of 2004 from year-end 2003 and decreased 22.8% from the end of the third quarter of 2004.”
Based on Lufkin’s fourth-quarter and full-year 2004 financial results and its backlog at the end of 2004, the Company today established its guidance for earnings per diluted share for 2005 in a range of $3.00 to $3.50. The Company also established its guidance for earnings per diluted share for the first quarter of 2005 in a range of $0.65 to $0.85, compared with $0.25 for the first quarter of 2004.
Mr. Smith added, “In addition to the much improved operating environment created by increases in oil prices and an expanding economy, we expect our 2005 results to benefit from a more stable pricing environment for steel and other raw materials. As evidenced by the pressure on our gross profit margin during the past year, we have been limited in our ability to raise product prices to match rapid increases in raw material costs, as we experienced in 2004. We believe the stabilization of raw material costs will enhance our ability to price our products to reflect earlier cost increases more fully, contributing to a recovery in our profit margins. Moreover, we believe our suppliers are better positioned to eliminate some of the temporary interruptions of supplies that negatively impacted 2004 production.”
Lufkin will discuss its results for the fourth quarter ended December 31, 2004, in a teleconference call today at 9:00 a.m. (central time). To listen to the call, participants should dial (719) 457-2625 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 a.m. (central time) February 10, through 7:00 p.m. (central time) February 17, 2005, by dialing (719) 457-0820 and entering reservation number 2514630.
This release contains forward-looking statements and information that are based on management’s beliefs as well as assumptions made by and information currently available to management. When used in this release, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions are intended to identify forward-looking statements. Such statements reflect the Company’s current views with respect to certain events and are subject to certain assumptions, risks and uncertainties, many of which are outside the control of the Company. These risks and uncertainties include, but are not limited to, (i) oil prices, (ii) capital spending levels of oil producers, (iii) availability and prices for raw materials and (iv) general industry and economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements and information.
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LUFK Announces Fourth-Quarter Results
Page 3
Feb. 10, 2005
Lufkin Industries, Inc. sells and services oil field pumping units, foundry castings, power transmission products and highway trailers throughout the world. The Company has vertically integrated all vital technologies required to design, manufacture and market its products.
LUFKIN INDUSTRIES, INC.
Financial Highlights
(In thousands, except per share data)
(unaudited)
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| | | Three Months Ended
December 31,
| | Twelve Months Ended
December 31,
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| | | 2004
| | 2003
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| | | 2003
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| Sales | | $ | 107,358 | | $ | 74,662 | | $ | 356,281 | | | $ | 262,255 |
| Cost of sales | | | 89,382 | | | 59,188 | | | 294,197 | | | | 210,238 |
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| Gross profit | | | 17,976 | | | 15,474 | | | 62,084 | | | | 52,017 |
| Selling, general and administrative expenses | | | 11,344 | | | 10,066 | | | 39,371 | | | | 37,544 |
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| Operating income | | | 6,632 | | | 5,408 | | | 22,713 | | | | 14,473 |
| Interest and other income (expense), net | | | 206 | | | 41 | | | (9 | ) | | | 1,233 |
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| Earnings before income taxes | | | 6,838 | | | 5,449 | | | 22,704 | | | | 15,706 |
| Income tax provision | | | 2,496 | | | 2,071 | | | 8,287 | | | | 5,968 |
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| Net earnings | | $ | 4,342 | | $ | 3,378 | | $ | 14,417 | | | $ | 9,738 |
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| Net earnings per share: | | | | | | | | | | | | | |
Basic | | $ | 0.63 | | $ | 0.51 | | $ | 2.12 | | | $ | 1.49 |
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Diluted | | $ | 0.61 | | $ | 0.50 | | $ | 2.07 | | | $ | 1.46 |
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Weighted average shares outstanding | | | | | | | | | | | | | |
Basic | | | 6,924 | | | 6,568 | | | 6,785 | | | | 6,542 |
Diluted | | | 7,100 | | | 6,693 | | | 6,960 | | | | 6,648 |
| Cash dividends per share | | $ | 0.18 | | $ | 0.18 | | $ | 0.72 | | | $ | 0.72 |
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LUFKIN INDUSTRIES, INC.
Balance Sheet Highlights
(In thousands)
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| | | December 31, 2004
| | December 31, 2003
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| Current assets | | $ | 136,336 | | $ | 104,299 |
| Total assets | | | 300,269 | | | 263,656 |
| Current liabilities | | | 49,105 | | | 33,468 |
| Long-term debt. | | | — | | | — |
Shareholders’ equity | | | 208,932 | | | 188,196 |
| Working capital | | | 87,231 | | | 70,831 |
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LUFK Announces Fourth-Quarter Results
Page 4
Feb. 10, 2005
LUFKIN INDUSTRIES, INC.
Division Performance
(In thousands)
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| | | Three Months Ended
December 31,
| | Twelve Months Ended
December 31,
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| | | 2004
| | 2003
| | 2004
| | 2003
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| Sales: | | | | | | | | | | | | |
Oil field | | $ | 64,813 | | $ | 43,330 | | $ | 216,025 | | $ | 144,082 |
Power transmission | | | 24,176 | | | 19,140 | | | 79,498 | | | 74,625 |
Trailer | | | 18,369 | | | 12,191 | | | 60,758 | | | 43,548 |
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Total | | $ | 107,358 | | $ | 74,661 | | $ | 356,281 | | $ | 262,255 |
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| | | December 31, 2004
| | September 30, 2004
| | December 31, 2003
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| Backlog: | | | | | | | | | |
Oil field | | $ | 61,642 | | $ | 47,366 | | $ | 24,944 |
Power transmission | | | 40,061 | | | 38,333 | | | 24,821 |
Trailer | | | 11,544 | | | 14,954 | | | 11,106 |
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Total | | $ | 113,247 | | $ | 100,653 | | | 60,871 |
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